MACKINAC ISLAND — The Detroit Regional Chamber's Mackinac Policy Conference is usually a friendly crowd for Gov. Rick Snyder, the businessman-turned-politician, mingling with like-minded policy wonks and business leaders.

But on Thursday, an uncharacteristic dent was on display in Snyder's armor as he stood in sharp opposition with the Republican leadership in the Legislature over the state's budget and how to deal with the retirement system for teachers.

The Republican leadership in the House and Senate came up with target budget numbers last weekend without input from Snyder. Their version of the budget changes Snyder's proposal by setting aside $475 million to start paying transition costs that would make new teachers go into a 401(k) system, rather than a pension system.

Snyder favors the hybrid system he created in 2012 that allows teachers to choose between a more modest pension plan that includes a smaller 401(k) component or a total defined contribution plan. That plan is fully funded, and about 20% of new teachers choose the defined contribution plan.

The Michigan Public Schools Employee Retirement System, or MPSERS, is the drag on the budget. It has a $29-billion unfunded liability that Snyder hopes will be paid off by 2038. His budget includes a $350-million payment toward that liability, said Snyder's state Treasurer Nick Khouri.

"We made huge reforms in 2012, but there are still some areas that could be improved to reduce taxpayer risk while making sure the benefits are guaranteed at the lowest cost as possible," Snyder said during his keynote speech at the conference. "Philosophically, my partners in the Legislature want to close the hybrid system that we put in place in 2012 and do a defined contribution plan."

Khouri spent a good portion of the conference Wednesday pushing Snyder's teacher retirement system to the media and the business and political leaders at the conference at the Grand Hotel on Mackinac Island.

"There are some concerns that we have with the legislative bill that's been dropped," he said. "There are near-term costs when you close a plan. There are costs that you have to incur, about $400 million next year, rising over the next few years to $700 over the next 10 years."

Lawmakers were just as adamant in their support for closing the hybrid system.

"We have work to do on the MPSERS and getting an agreement with the governor. We hope that he sees it our way," said Senate Majority Leader Arlan Meekhof, R-West Olive. "This is a priority for us to stop digging the hole on the debt that we have. We're inching toward that. This is an opportunity that doesn't come along very often."

Said Speaker of the House Tom Leonard, R-DeWitt, "We’re in the middle of the debate about the broken teacher retirement system. We haven’t met with the governor, but we will be touching base. Nobody has walked away from the table, but I do hope we come up with a solution that we can all agree on. Right now, we’re a little ways away from that."

Because they're in the minority in both the House of Representatives and Senate, Democrats in the Legislature have been shut out of the debate over the target budget numbers and the debate over the retirement system.

Snyder said he respects that the Legislature is a separate branch of government, but hopes lawmakers won't hold up passing a budget because of disagreements over the pension system. For the past six years, the state budget has passed in early June, giving school districts and municipalities,which operate on a different fiscal year that begins in June, more certainty on how much money they'll have for the upcoming school year.

"I don't want to leave them hanging," Snyder said. "Switching to defined contribution would just cost more by billions and billions of dollars, and there are huge transition costs that need to be paid. Where does that money come from?"

The disagreement trickled out to other sessions in the conference.

John Rakolta Jr., chairman and CEO of the Detroit-based construction company Walbridge, said he thinks it makes sense to close the pension system for teachers.

"It’s draining a large, disproportional share of the dollars out of the kids' education. In the case of the city of Detroit, 37% of payroll goes to pensions. In business, it’s 4% or 5%," he said. "You don’t want to bankrupt the state today to fix something that’s been broken for 20, 30 or 40 years. But we need to go to a defined contribution program."

But Herman Gray, president and CEO of the United Way of Southeast Michigan, said changing the teacher retirement system was a mean-spirited proposal with political motivation.

"I’m not saying just open the bank vault and pour it out to teachers unions, but separate the union piece from the teacher piece," he said. "We live in such a polarized environment that when we’re sacrificing what’s most important to us to score political points, that's a shame."

And Nikolai Vitti, the newly hired superintendent of the Detroit Public Schools Community District, said changing the system makes it harder for him to retain and recruit new teachers to fill the 260 vacancies in the district.

"I’m concerned that when individuals think about becoming teachers, one of the few perks — and there aren’t many — are pensions. If we see that go by the wayside, we’re going to create one less incentive for teachers to consider the profession," he said.

Other than the teacher pension issue, Snyder discussed the need for civility in society, a desire to create more opportunities for young people through tech training and using technology to make it easier for people to live and work throughout the state.

But he offered no new proposals in his remarks and repeated calls for better and more targeted career counseling for students and their parents.

"Having a high school diploma is not the only answer anymore. We need to think more broadly of how we get that credential," he said, noting there are more than 100,000 job openings in the state, but people don't always have the job skills to get those jobs. "The question is not is there a job, there are thousands of unfilled job, but how do you get the skills for those jobs?"

Despite the lack of new ideas and proposals, Gregory McPartlin, cofounder of Parjana Distribution, which installs systems to control standing water on golf courses, thinks Snyder is doing a very good job.

“I think he’s been an incredible visionary, an incredible leader, and through everything that he’s been through and all the challenges, I think he’s really stepped up.”

Contact Kathleen Gray: 313-223-4430 or kgray99@freepress.com. Follow her on Twitter @michpoligal. Business columnist John Gallagher contributed to this report.